Brent crude oil broke above $55-per-barrel threshold on Monday, trading at a 16-month high, as rising prospects of a tightening market after an OPEC output cap deal overshadowed concerns over mounting production from producers outside of the cartel.

The international oil benchmark hit an intra-day low at $55.32 per barrel thanks to OPEC sentiment that continued to give speculators impetus to increase bets on higher oil prices.

Mohammed Sanusi Barkindo, OPEC’s secretary general stated at an energy conference on Monday that oil demand in Asia is likely to keep on rising steadily. Demand from India alone is expected to jump to more than 10 million barrels per day (bpd) by 2040, from 4.1 million barrels per day now, said Barkindo.

Meanwhile, the potential output cut agreement between OPEC and Russia might not be as deep as initially anticipated. Moscow has agreed to slash its output by 300,000 bpd in early 2017 and planned to use its November oil production as its baseline for the cut. However, Russia’s average daily oil output in November was reported to reach its highest in almost 30 years at 11.21 million bpd, suggesting that the nation’s output will remain high even after a reduction.

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Asian stocks joined a global relief rally on Tuesday as investors brushed off the defeat of Italy’s constitutional referendum. U.S. equities closed higher yesterday with after the Dow Jones Industrial Average setting a fresh record high. The benchmark finished up 45.82 points, or 0.2%, at 19,216.24, a fresh record close following strong economic data.

A report from the Institute for Supply Management on Monday showed American services industries grew at the fastest pace in 13 months in November. The service side of the U.S. economy that employs about 80% of Americans rose to 57.2% last month from 54.8% in October, signaling that more businesses are expanding instead of contracting. Given the fact that most companies reporting business is steady, the case for a rate hike later this month has been continually strengthened.

Australia’s central bank kept interest rates unchanged earlier today, citing a global commodity upswing as a factor that boost national income. The Reserve Bank of Australia left the cash rate at 1.5 percent Tuesday as higher resource export prices ease the impact of a weaker economy at home where labor-market hiring relies heavily on part-time employment as participation falls.

As the U.S. Federal Reserve will almost certainly tighten its policy this month, Governor Philip Lowe can wait for his Australian dollar to be pushed down by a stronger greenback without further easing. A fall in local currency’s prices will aid Australia’s key service exports of education and tourism that are highly sensitive to the exchange rate. The RBA’s next policy meeting isn’t until February, when the bank will release its updated quarterly growth and inflation forecasts.

Technicals

EURUSD

Fig: EURUSD H4 Technical Chart

EURUSD resumed its upbeat moves following a consolidation at around 1.07600. The market returned to the bullish zone after the pair pulled back from the lowest level in one year at 1.05048. Coupled with support from two MAs, ADX is soaring with a divergence between the +DI and –DI lines, suggesting further advances.

USDCHF has been struggling around the support at 1.00600 after falling from as high as 1.01767. The price action has crossed over a couple of MAs from above, suggesting a reversal into a downtrend. While RSI is moving towards the oversold zone, ADX keep surging with a wide gap between +DI and –DI lines.

Brent crude has been trading in an upward trading range which has been formed by higher highs and higher lows since early August. The commodity price has bounced back from the lower boundary at 47.39 and is heading upwards to the upper boundary. As RSI has neared the overbought zone, a pullback may occur when Brent crude hits the resistance.

Euro 50 index has moved past the resistance at 3060.00 which it failed to break above yesterday. The index may edge higher to attempt the 50.0% Fibonacci retracement as RSI is pointing upwards while the short-term MA20 has converged with the long-term MA50 from below.

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The South African rand soared 0.8% to hit an intra-day high at 13.64345 per dollar on Tuesday even though the economic data coming out today pointed to the fact that the South African economy remains extremely weak. The pair USDZAR slumped for three days in a row after ratings agencies held off on junking the country’s financial reputation in the past two weeks.

Since last Friday when S&P Global Ratings affirmed the nation’s BBB- assessment, the local currency has gained more than 3.5%. However, according to a report released on Tuesday in Cape Town, South Africa’s gross domestic product only expanded at an annualized 0.2 percent rate in the three months through September. This was dramatically lower than the upwardly revised growth of 3.5 percent in the preceding quarter and failed to reach economists’ estimates of 0.6 percent growth in the third quarter.

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The Australian dollar fell against most of its major rivals after a report by the national Bureau of Statistics showed the world’s 12th-largest economy shrank by the most since 2008. The country’s gross domestic product was reported to decrease 0.5% in the three-month period to September compared to the prior quarter. The decline, which has not been seen since 2011, was driven by drops in construction and government spending.

Crude prices extended its slide on Wednesday on persistent doubts whether an agreement on crude production cut led by OPEC and Russia would be deep enough to deal with a global glut that has restrained markets for over two years. Since the deal was announced in a meeting last week, both OPEC and Russia have since reported record production.

OPEC and non-OPEC oil producers are scheduled to meet this weekend in Austria's capital to finalize details of the output cut, which aims at an overall reduction of around 1.5 million barrels per day.

Technicals

GBPAUD

Fig: GBPAUD H4 Technical Chart

GBPAUD has been on a slump since the pair reversed lower from as high as 1.71500. The pair is struggling around the long-term MA50. The RSI index has entered the bearish zone, signaling strengthening buyers. The pair may head to the support at 50.0% retracement.

As can be seen from the price chart, CADJPY has been supported by the short-term MA20 although the pair is trading sideways and in a thin range. CADJPY may approach the 38.2% retracement as RSI remains in the bullish area, which shows that buyers are overwhelming in the market.

Sugar resumed its downtrend following a correction from four-month low at 18.79. The commodity crossed over the short-term MA20 at 19.50 but failed to sustain the upbeat moves. RSI pulled back from the central line, indicating the defeat of bulls. The price is expected to test the 38.2% support.

DAX 30 index has been on a strong rise that sent the benchmark near the 61.8% Fibonacci retracement. As can be seen from the indicator chart, the RSI index has already penetrated the overbought zone, signaling an upcoming pullback. Coupled with the resistance at 61.8% level within the sight, a correction may occur around this handle.

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Asian shares continued to rise on Thursday, ignited by fresh U.S. equity records. Both the S&P 500 Index and the Dow Jones Industrial Average rose to all-time high records yesterday, thanks to wagers that the European Central Bank may extend its asset buying program at a policy meeting due later today. The MSCI Asia Pacific Index soared 1.2% to its peak in one month, extending gains for a third day. Japan’s Topix index climbed 0.9% while gauges in Australia, South Korea and Hong Kong were also higher.

Risk appetites got an added boost after the Chinese General Administration of Customs reported upbeat trade figures for November. Official data on Thursday showed the country’s exports rose unexpectedly by 0.1% from a year earlier, while imports climbed 6.7% on strong demand for commodities. That left the country with a trade surplus of $44.61 billion for the month.

The euro was steady around 1.07700 versus the dollar with market attention turning to the ECB meeting. ECB chief Mario Draghi is expected to prolong the bank’s 80 billion euros ($86 billion) a month of bond purchases beyond March in the wake of Italy's "No" vote last weekend.

Crude price kept declining on Tuesday even after weekly report from the U.S. Energy Information Administration on Wednesday showed a deeper-than-expected draw in U.S. stockpiles last week. Crude oil inventories in the U.S. were reported to fall by 2.4 million barrels in the week that ended on Dec. 2, compared with analyst expectations for a draw of 1 million barrels. However, government data also pointed out that oil supplies at Cushing, Oklahoma, the biggest U.S. storage hub for crude futures, increased by a hefty 3.8 million barrels last week. This is the biggest weekly added amount since 2009.

In Japan, final third-quarter GDP reported by the Cabinet Office showed the economy expanded less than was projected. The Japanese economy grew an annualized 1.3% after economists predicted a rate of 2.3% with capital expenditure shedding 0.4% in the quarter and inventories subtracting 0.3 percentage point from growth.

Technicals

EURGBP

Fig: EURGBP H4 Technical Chart

EURGBP has been moving sideways since yesterday after surging to around 0.85200. The short-term MA20 is heading upwards, attempting to cross over the long-term MA50 from below. With support from two MAs, the pair may approach the resistance at 0.85800. RSI remains above 50, consolidating further up moves.

EURUSD has been on a rise following a consolidation at around 1.07200. The rally has been bolstered by two MAs hanging under the price action. Both RSI and ADX are soaring, confirming a strong upside. The pair may attempt the resistance at 1.08500.

Natural Gas futures rebound from the 0.0% Fibonacci level at 3.540. The price was also supported by two MAs moving below the price action. Buyers seem to overwhelmingly dominate in the market as can be seen from the indicator chart, RSI has pulled back from the central line to move upwards in the bullish zone.

Euro 50 index has been on a correction after surging as high as 3160.00 – the highest level since April 21st.The rally from as low as 2974.10 had sent the pair into the overbought market which prompted investors to book profit. A reversal may occur around the support at 3122.00

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Natural gas futures were little changed on Friday after jumping yesterday following federal data that showed a draw from the U.S. stockpiles last week.

Natural gas for January delivery rose to $3.728 per million British thermal units after the U.S. Energy Information Administration reported Thursday that natural gas storage in the U.S. dropped by 42 billion cubic feet during the week to December 02nd. The result was in line with expectations, sending total stocks to 3.953 trillion cubic feet, up 51 billion cubic feet from a year ago and 254 billion cubic feet above the five-year average.

Weather forecasts also contributed to the rally, indicating below-average temperatures coming in across the country. As more than half of Americans using natural gas for space heating, lower temperatures in the winter will drive up demand and give a boost in prices.

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